Generation Y’s Biggest Investment Mistake

MillenniaAccording to a CNBC news report in April 2015, young investors, or the millennials known as Generation Y, need to overcome their jaded outlook about stock investments and financial markets. Experts believe that many of the young investors are chasing after the wrong stocks with expensive consequences. One portfolio manager summed up the younger generation’s biggest investment error.

He said that many young investors are putting their money in such exciting and expensive names as Tesla and Twitter rather than looking at stock investments more conservatively. However, there are also a large number of Generation Y Americans who do not invest in stocks at all. According to a Bankrate.com survey, just over 25% of people under 30 are stock investors. That number is low when you compare it to the number who invest between 50 and 64 years old (58%).

Surveys show that the younger generation is not a financially astute group of people and, for the most part, distrust stocks and the markets. However, these people, who were born in the early 80s to late 90s, can lose out on the opportunity of time by sitting complacently on the financial sidelines. That’s because the major value proposition of young investors today is a compounding interest rate. Therefore, the biggest benefit connected with investing for young people is a lengthy horizon of time.

When you consider the market has risen by 2,000% since 1985, that is a major return over a 30-year period. That is also the same amount of time millennials are now looking at between now and their own retirement. If you are used to living through economic downturns, which millennials are, then investing conservatively in stocks today can offer exponential rewards in the future.

Most financial experts concur that the most propitious time to begin stock investing is when a person is young and can wade through the downturns as well as take advantage of compounding interest rates. The main reason that millennials are not investing is a dearth of financial knowledge, all which makes them less confident about putting money into stocks. Another reason is a lack of money.

Canadian Government to Follow CFPB’s Lead in Curbing Payday Loans

Parliament HillThe United States consumer watchdog agency unveiled a series of proposed rules to curb the payday loan industry, which has generated mixed reviews from groups and the industry.

On Thursday, the Consumer Financial Protection Bureau (CFPB) announced its proposal that would cap the number of payday loans a customer can borrow, limit how many times a payday loan store can debit an account and require businesses to inquire about the client’s income to determine if they can repay the principal sum.

According to CFPB director Richard Cordray, the general public will have up to 90 days to comment on the proposal. Since it doesn’t require conrgressional approval, the rule could be rolled out as early as next year. The CFPB, which has chastized the business models of payday loan companies, has taken swift action against a often criticized industry.

North of the border, organizations are calling for similar action. Some Canadian groups are urging the federal government to follow in the footsteps of the CFPB by adopting similar measures that would rein in an industry that has faced a lot of ridicule over the years.

Despite provinces and municipalities implementing their own rules and regulations, ACORN Canada says Ottawa needs to intervene and prevent consumers from entering into a debt trap.

“Although some needed proposed protections — such as the requirement that longer-term loan payments consume no more than 5 per cent of a borrower’s monthly income — were dropped, this crackdown starting at the national level is desperately needed in the U.S. and Canada,” said ACORN spokeswoman Donna Borden in a statement.

Across Canada, each province has installed its own cap on payday loan interest rates. Meanwhile, the Department of Finance has confirmed that the government is honing in on raising awareness about the dangers of Internet loans. It also noted that it’s working closely with the provinces to “maintain the integrity of the payday lending framework.”

Tom Cooper, director of the Hamilton Roundtable for Poverty Reduction, told the Associated Press that this isn’t good enough. Cooper believes the Canadian government has facilitated the rise of payday loans in the country because the national banking system has been a failure.

“The federal government really kicked the can of regulation down to the provinces and so we have a patchwork quilt of what provincial governments are doing in terms of regulating the payday loan industry,” he told the news organization.

Canadian payday loan businesses warn that if Ottawa were to install its own regulations, which effectively duplicates or even triplicates other legislation, then it would eliminate an important financial option for struggling consumers.

“A huge number of Americans who rely on short-term loans who under these new rules will be unable to get them,” said Canadian Payday Loan Association president Tony Irwin. “Those are people who need money now so if actions are going to be taken that are going to restrict the markets, you need to have alternatives in place, if not where are they going to go?”

Anti-poverty organizations, the Canadian Union of Public Employees (CUPE) and liberal media outlets are encouraging the government to establish a National Postal Bank.

Tax Software Poses Security Risks for Americans

Tax ScamEvery year, many people in the United States file their tax returns online using software that is part of an IRS tax filing program. However, officials are urging consumers to exercise caution if this is something that they plan to do because some tax filing software poses security risks. The warning comes following an audit of IRS tax filing software, which showed that many of the programs were not up to scratch when it came to security.

Anyone who earned under $62,000 last year will be eligible to file their taxes free of charge online using one of the thirteen software options that form part of the IRS program. However, the audit carried out by the Online Trust Alliance means that those who are going to be doing this need to be very cautious. The program has been in operation for thirteen years and around 70 percent of Americans are eligible to participate.

Nearly half of filing websites failed security protocols

The audit that was carried out showed that out of thirteen websites that are part of the IRS program for filing taxes online, close to 50 percent failed security protocols. There were various issues that arose when the audit was carried out such as lack of email authentication, which puts consumers at risk of falling victim to phishing scams.

One official from the Online Trust Alliance said that when the websites were tested they either did really well and passed with over 80 percent or failed altogether. Several of the websites that were tested failed security even the most basic security protocols, reflecting how easy it could be for people to become victims of fraud simply for using online software and websites to file their taxes.

The software websites that are used for filing online taxes are part of the Free File Alliance, which is a coalition of companies in the tax software field. These companies also offer fee based services that are more advances for those who are on incomes that are higher than the $62,000 threshold.

An official from the Free File Alliance commented on the findings by the Online Trust Alliance, stating that its members were tested and evaluated every year to ensure that they were offering the highest levels of security and privacy, However, he added that the findings from the research would be taken into consideration by officials from the Free File Alliance and would be incorporated into future assessments to ensure that users of the software could benefit from peace of mind when it came to security.